The Federal Trade Commission (FTC) today issued a revised Notice of Proposed Rulemaking regarding the proposed Business Opportunity Rule (Rule) originally promulgated nearly two years ago. The revised proposed Business Opportunity Rule significantly narrows the scope of the original proposal, a change that was strongly recommended by DSA to avoid broadly sweeping legitimate multilevel marketing companies into an “unintended” burdensome regulatory scheme. Most importantly, the FTC has made clear its intent in revising the initial Rule is to exempt legitimate direct selling companies, such as those that are members of the DSA, from the revised Rule.  The FTC concluded that the revisions to the initial proposal were necessary to “avoid broadly sweeping in sellers of multilevel marketing opportunities.”

The FTC’s analysis for the revision of the initial Rule recognized DSA’s arguments that the breadth of coverage of the initial Rule would have encompassed legitimate direct selling companies where there is little or no evidence of fraud.  Moreover, DSA argued, and the FTC agreed, that the requiements in the initial proposal would have imposed significant burdens on multilevel marketing companies without sufficient countervailing benefits to consumers.

In concluding that a revised Rule was necessary to limit the impact on multilevel marketing companies, the FTC stated “the burdens (of the initial Rule) that would be imposed upon legitimate business operations would not appear to be justified by possible benefits to consumers…the Commission believes that the proposed Rule is too blunt of an instrument to cure fraud in the MLM industry.”

Accordingly, the FTC also concluded that it will continue to use the flexibility inherent in Section 5 of the FTC Act to address individual fraud cases in the MLM industry.

The FTC has requested comments to the proposed revised Rule by May 27, 2008, and rebuttal comments by June 16, 2008.  The FTC might hold hearings, or in lieu thereof, workshops, to discuss the issues raised in its Revised Notice of Rulemaking and the comments it receives from the public.

DSA will continue to monitor developments and work with both member companies and the FTC as the process continues. Details of any additional developments will forthcoming.

The complete text of the FTC’s analysis and proposed Notice of Revised Notice of Proposed Rulemaking is set forth http://FTC.gov/os/2008/03/R511993business.pdf